Central Bank: Slow, steady growth expected

THE Central Bank’s Monetary Policy Committee said in the latest and final monetary policy report for this year, released on Friday, that local businesses are poised to continue its recovery in 2023, but growth may be slow as global and domestic shocks drive inflation upward.

“The committee recognised that tremendous uncertainty characterised expected geopolitical developments into 2023, while financial markets remained unsettled,” the committee said.

“Domestically, business operations were poised to rebound further, supported by bank credit and potentially some of the additional fiscal space afforded to Government from higher energy prices.

“The committee however noted with concern the rising path of domestic inflation, albeit dominated in 2022 by external or weather-related shocks as well as the fuel subsidy reduction.”

Despite uncertainty in the global markets and rising inflation, the committee advised Central Bank to maintain its repo rate at 3.50 per cent, however it suggested monetary tools such as more active open-market operations to address inflation. The committee’s report suggested a cautiously optimistic outlook for 2023, noting several factors that affected monetary policies in 2022, such as the Ukraine war, the slowing of the Chinese economy and other inflationary pressures such as extreme weather patterns owing to climate change and delays and increases in the cost of shipping, will spill over into the New Year.

Domestically, however, the start-up of upstream projects promise to improve production in the energy sector and strengthening business activity promises to develop the non-energy sector.

“Nonetheless the revival of the labour market remains sluggish, with the unemployment rate up from 4.5 per cent in the second quarter to 5.4 per cent in the third quarter of 2022,” the MPC said.

It also made note of the Central Statistical Office’s statistics on inflation pointing out that it stood at 6.2 per cent, year-on-year, in September.

In August the headline inflation was 6.3 per cent.

The committee said food inflation was registered at 11.6 per cent, while core inflation measured 4.8 per cent in September.

While external influences dominated the trajectory of domestic inflation for the first nine months of the year, the committee said imported commodity prices, flooding and the impact of the reduction of the fuel subsidy will lead to even more price increases in the last quarter in the year.